Are you Self-Employed? Have fun getting a Mortgage!
May 2nd, 2008 by Chris
As you have probably heard, the housing market is not doing so well across the better part of the United States. To go along with this, things within the mortgage industry are just about the same. To make things even worse, if you are self-employed and in the market for a new home, you are going to have to jump through hoops to find a lender that is willing to do business with you. Is it impossible to find a quality lender that works with self-employed individuals? Of course not. But with that being said, you will be treated much differently than somebody who can prove that they have a steady job working for a company.
What do you do?
After telling a lender that you are self-employed, one of the first things that they will ask is what you do. Believe it or not, I once had a mortgage broker ask me if I was a “self-employed drug dealer.” While he was just kidding, this just goes to show you how lenders think. They want to know exactly where your money is coming from, whether it is a legal source of income, and if your job is stable enough to support a mortgage payment.
How much do you earn?
Any lender is going to want to know how much you earn. This holds true even if you are not self-employed. As a freelance writer, I do not receive one paycheck per month that shows my income. For this reason, it takes a bit of creativity and time to get on the same page as the lender. Wells Fargo asked for two years worth of bank statements and tax information. This showed them not only how much money I earned the past two years, but how much I had saved as well as where my money was going each month.
But wait, we want more…
Believe it or not, some lenders are not going to be happy with tax returns and bank statements. A couple of days before the closing on my current home, my mortgage broker called to tell me that the lender now wanted three “letters of reference” from current clients. Not only did they want letters, but they required them to state particular details such as the type of work completed. This put me into a scramble, and I barely met the deadline. Luckily, I have several steady clients who were more than willing to help me out because they have gone through this same process themselves.
There is no denying that being self-employed is full of benefits. I get to work from home, make my own schedule, and call all the shots for my business. But when it comes to obtaining loans, sometimes I wish that I received a steady paycheck.
If you ever run into this situation, keep these two points in mind:
1. There is a lender somewhere that is willing to work with you. They may be difficult to find, but keep looking. If you need help, get in touch with a mortgage broker. They know which lenders tend to deal more kindly with self-employed professionals.
2. Make sure that you give yourself plenty of time to get together the appropriate paperwork. As mentioned above, you never know when your lender is going to ask for more. If you are organized, you can move forward as quickly as possible so you are not forced to delay closing on your new home.
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